RMD and Taxes

Most of my investments are in IRA (tax-deferred accounts).
This is my first year of RMDs.
Typically, when I distribute IRA money (like a Roth conversion), I withhold taxes from the distribution.
When I took the RMD from one account and withheld a tax percentage, it showed as satisfying the RMD (as calculated by the brokerage) even though the net to my bank account was less than required (by the tax amount).
Is that correct?
Do the taxes owed on an RMD count as part of the RMD if they come from the same distribution?

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Yes.

I’ve been doing RMDs for a few years and I’ve had my taxes withheld from the distribution. I generally do my distribution in the late fall after I can be sure I’ve not had too many golf tournament winnings.

JimA

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Thanks. Interesting that the taxes paid can be part of the RMD.

“I generally do my distribution in the late fall after I can be sure I’ve not had too many golf tournament winnings.”

I’m pretty sure that even if you win a major, your golf winnings won’t affect this year’s RMD…
But then, I’m not a golfer.

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I’m pretty sure that even if you win a major, your golf winnings won’t affect this year’s RMD…
But then, I’m not a golfer.

But will make a difference on income taxes.

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Interesting that the taxes paid can be part of the RMD.

All that’s required to satisfy the RMD is that the money be distributed out of the IRA and not back into another IRA/retirement plan. The distribution can be to a charity via a QCD, to the IRS via withholding or to one of your bank or taxable brokerage accounts, where you can spend or invest it how you want - or to some combination of the 3 - just so it adds up to the required amount for the RMD.

AJ

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Do the taxes owed on an RMD count as part of the RMD if they come from the same distribution?

What matters is the total distribution.

I have sending 95% in state and federal withholding on required RMDs from an inherited IRA. Withholding has preferred treatment over estimated taxes. Withholding is treated as remitted evenly across quarters regardless of when it is done. It is away to avoid underpayment penalties.

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I’m pretty sure that even if you win a major, your golf winnings won’t affect this year’s RMD…
But then, I’m not a golfer.

Yes, but I can adjust my W/H from the RMD to cover the taxes on any winnings or other income changes that might happen. Hence, a near year-end RMD.

JimA

Do the taxes owed on an RMD count as part of the RMD if they come from the same distribution?

I’ve been doing RMD’s for several moons now. Seems like I started when I turned 70 and then a couple of years later when my wife turned 70. We’re now 78 and 76 respectively. We have RMDs deducted from both Scudder (now Deutsch Funds) and R.W. Baird on a monthly basis with 20% held for taxes. Along about the November/December time frame I get Baird to withhold an extra $5K just to be sure. All has turned out good. At least I hope so. Usually get a sizeable refund. I know I know why let Uncle have all that money? Look I don’t care. I’m safe and I’m happy. So is the Boss.

Regards,

ImAGolfer

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I’ve not had too many golf tournament winnings.

Hey Jim. Don’t feel pregnant. I finally had a no-blood and had to split my winnings. Walked away with $1.50. Been playing bad for the last couple of rounds and finally had a decent score. When you split $3.00 it’s always a problem. Who carries $.50 to the golf course these days? Used to play with a guy in our group and he never had anything less than a $50. Course he was in his 90’s so we had to put up with him.

Fairways & Greens,

ImAGolfer

I have 47% of my quarterly RMD withheld for taxes. That is my major tax funding method. It makes the estimated tax burden manageable. I adjust estimated taxes for capital gains as the year goes on.

"Hey Jim. Don’t feel pregnant. I finally had a no-blood and had to split my winnings. Walked away with $1.50. Been playing bad for the last couple of rounds and finally had a decent score. When you split $3.00 it’s always a problem. Who carries $.50 to the golf course these days? Used to play with a guy in our group and he never had anything less than a $50. Course he was in his 90’s so we had to put up with him.

Fairways & Greens,

ImAGolfer"

Well, I don’t do skins or any gambling when playing golf. But sometimes I finish at the top of the leaderboard and win gift-card dollars. Over 30 tournament rounds a year; it can add up!!

JimA

Interesting that the taxes paid can be part of the RMD.

The purpose of the RMD is to make you incur taxable income. So, you have to take out a defined amount from your IRA. But, you can spend it, put it in the bank, donate it, or use it to pay taxes.

And on the “donate it” part, you can even use that to reduce your taxable income while using the donation to count towards the RMD, even if you don’t itemize.

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And on the “donate it” part, you can even use that to reduce your taxable income while using the donation to count towards the RMD, even if you don’t itemize.

The devil is (as always with taxes) in the details. In order to accomplish this, you must do what’s known as a Qualified Charitable Distribution (QCD). The distribution must go directly from your IRA to the charity - not stopping at Go or in any of your accounts. And your broker should be made aware that you are making a QCD so that the 1099 will be coded correctly.

AJ

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And your broker should be made aware that you are making a QCD so that the 1099 will be coded correctly.

AJ

This is one time I must disagree with AJ.

QCDs are NOT reported on the 1099-r. The taxpayer must track and retain proof for distributions that qualify as a QCD then deduct that amount from the taxable amount report in the 1099-r on their tax return.

If you have a checkbook for your IRA, checks can be sent to the charity and provide proof of a QCD.

QCD is considered toward the RMD if the RMD hasn’t been met by other distributions.

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